Provides Guidance for Full Year 2005
HOUSTON, Nov. 10 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI)
today announced financial and operational results for the third quarter 2005.
* Net income increased 40% over third quarter 2004, and 16% over second
quarter 2005
* 100% successful in drilling three exploration wells and two development
wells during the third quarter of 2005
* 83% drilling success year to date -- 15 of 18 in exploration drilling
and 5 of 6 in development drilling
"We are pleased to have achieved this solid growth, both on a year over
year basis as well as sequentially, despite the dramatic disruption of this
year's hurricanes," said Tracy W. Krohn, Chairman and Chief Executive Officer.
"Our accomplishments this quarter are testimony to our ability to generate
increasing cash flow and an attractive return on investment from operations in
the Gulf of Mexico."
Net Income: Net income for the three months ended September 30, 2005 was
$53.1 million, or $0.80 per diluted share, on revenue of $153.4 million,
compared to net income of $38.1 million, or $0.58 per diluted share, on
revenue of $120.5 million for the third quarter of 2004. Net income for the
nine months ended September 30, 2005 was $138.2 million, or $2.09 per diluted
share, on revenue of $432.3 million, compared to net income of $110.8 million
or $1.68 per diluted share, on revenue of $369.9 million for the same period
during 2004.
Cash Provided from Operations and EBITDA: Net cash provided by operating
activities increased 65% to $145.3 million during the third quarter 2005 from
$88.0 million during the prior year's third quarter. The increase in cash
provided by operating activities was primarily attributable to the effect of
higher commodity prices realized on our production as compared to last year.
Third quarter 2005 EBITDA was $126.1 million, compared to $94.9 million during
the prior year's third quarter. Net cash provided by operating activities for
the nine months ended September 30, 2005 increased 32% to $343.9 million from
$259.8 million in 2004. EBITDA was $350.7 million for the nine months ended
September 30, 2005, compared to $293.1 million for the prior year period.
Please refer to the attached schedule later in this release for a
reconciliation of net income to EBITDA.
Production and Prices: Total production in the third quarter of 2005 was
11.5 billion cubic feet ("Bcf") of natural gas at an average price of $8.64
per thousand cubic feet ("Mcf") and 1.0 million barrels ("MMBbls") of oil and
liquids at an average price of $54.39 per Bbl, or 17.5 billion cubic feet of
natural gas equivalent ("Bcfe") at an average price of $8.79 per Mcfe. This
compares to production of 12.6 Bcf of natural gas at an average price of $5.90
per Mcf and 1.2 MMBbls of oil and liquids at an average price of $38.34 per
Bbl, or 19.8 Bcfe at an average price of $6.08 per Mcfe in the third quarter
of 2004. The Company estimates that approximately 5.3 Bcfe of production was
deferred in the third quarter of 2005 due to hurricanes Katrina and Rita, and
that approximately 11.7 Bcfe will be deferred in the fourth quarter due to the
storms. Without this deferral, we believe we would have met our previously
announced guidance for the third quarter 2005 and the full year 2005. There
were no hedges in place during the third quarter of 2005 or 2004.
For the nine months ended September 30, 2005, total production was 37.1
Bcf of natural gas at an average price of $7.31 per Mcf and 3.4 MMBbls of oil
and liquids at an average price of $47.38 per Bbl, or 57.4 Bcfe at an average
price of $7.52 per Mcfe. This compares to 40.3 Bcf of natural gas at an
average price of $5.92 per Mcf and 3.7 MMBbls of oil and liquids at an average
price of $34.99 per Bbl, or 62.7 Bcfe at an average price of $5.89 per Mcfe
for the same period in 2004.
Lease Operating Expenses ("LOE"): LOE for the third quarter of 2005
increased to $18.2 million, or $1.04 per Mcfe, from $17.1 million, or $0.87
per Mcfe, in the third quarter of 2004. The increase in LOE was due to higher
expenses associated with increased interest in one of our properties and some
pipeline repair work. The per unit increase reflects the impact of lower
production volumes primarily caused by the hurricanes. If third quarter
deferred production of 5.3 Bcfe were included in the calculation, the
Company's LOE would have been $0.80/mcfe for the third quarter. Lease
operating expenses for the nine months ended September 30, 2005 was $52.3
million, or $0.91 per Mcfe, compared to $53.0 million, or $0.85 per Mcfe in
2004 with the dollar decrease in the 2005 being attributable to lower
operating cost at properties acquired in 2003, but offset by higher workover
expenses and maintenance projects.
Depreciation, depletion, amortization and accretion ("DD&A"): DD&A
increased to $45.6 million, or $2.61 per Mcfe, in the third quarter of 2005
from $36.0 million, or $1.82 per Mcfe, in the same period of 2004. DD&A for
the nine months ended September 30, 2005 was $138.8 million or $2.42 per Mcfe,
compared to DD&A of $121.1 million, or $1.93 per Mcfe, for the same period in
2004 because of the Company's higher depletable costs associated with our
increased drilling activities.
Capital Expenditures and Operations Update: During the third quarter of
2005, W&T achieved 100% drilling success in the drilling of three exploration
wells and two development wells in the Gulf of Mexico. During the third
quarter of 2005, W&T spent $60.9 million for development, $15.1 million for
exploration and $6.5 million for other capital items, including acquisitions.
For the nine months ended September 30, 2005, capital expenditures of $229.6
million included $122.5 million for development activities, $84.8 million for
exploration, $22.0 million for acquisition and other leasehold activity and
$0.3 million for other capital items. These expenditures do not include any
amount of capitalized salaries or capitalized interest but do include dry hole
costs of $11.3 million.
Of the drilling, completion and facilities expenditures budgeted for 2005,
this year the Company has spent $82.8 million in the deepwater, $22.6 million
on the deep shelf and $101.9 million on the conventional shelf and onshore
projects. Additionally, W&T has spent $10.6 million on expensed workovers and
major maintenance projects and $13.6 million for plug and abandonment
expenses.
Drilling Highlights: W&T continues to have success with its exploration
and development program. The Company achieved 100% success in drilling three
exploration wells and two development wells during the third quarter. Nine
successful wells and one unsuccessful well have been drilled since the end of
the second quarter.
Field Name/Well Category Working Interest %
Drilled in 3rd Quarter
Eugene Island 349 B-13ST Development 29.0%
Ewing Bank 989 Exploration 100.0%
High Island A443 A-5ST Exploration 92.0%
Main Pass 185 Exploration 33.3%
Ship Shoal 359 A-12 Development 59.0%
Drilled after 3rd Quarter
Eugene Island 107 A-3 Development 25.0%
High Island A443 A-2ST Exploration 84.0%
Western Gulf Area Well Exploration 50.0%
Ship Shoal 177 A-4ST Development 75.0%
One development well was unsuccessful, as follows:
Field Name/Well Category Working Interest %
Drilled after 3rd Quarter
High Island A572 C-23ST Development 4.8%
The Company plans to have drilled or be actively drilling more than 27
exploration and seven development wells in 2005. W&T believes it will achieve
most of its original drilling program for 2005, despite the interruptions
caused by hurricanes Katrina and Rita.
Lease Sale: At the MMS - OCS Oil and Gas Lease Sale 196, Western Gulf of
Mexico, held on August 17, 2005, W&T was the high bidder on Garden Banks Area,
Block 152, located in approximately 541 feet of water. Subsequently, the MMS
has awarded W&T the lease. The Company's cost for this lease was $430,000,
with W&T owning a 100% working interest.
Dividends: On September 30, 2005, the Company's board of directors
declared a cash dividend of $0.02 per common share, payable on November 1,
2005 to shareholders of record on October 14, 2005. On August 1, 2005, W&T
paid a cash dividend of $0.02 per common share to shareholders of record on
July 15, 2005.
Hurricane Update: W&T is currently producing approximately 160 million
cubic feet of gas equivalent (MMcfe) net per day, which represents 84% of the
Company's pre-Hurricane Rita and 65% pre-Hurricane Katrina production.
Currently, the Company still estimates that 20 MMcfe per day additional net
production is shut-in at Mississippi Canyon 718 ("Pluto") because of Hurricane
Katrina. The Company expects to defer between 16.5 bcfe and 17.5 bcfe of
production in 2005 due to the hurricanes.
While several platforms had some damage, only 5 of 104 gross operated
platforms had significant physical damage, including East Cameron 338 A and
Eugene Island 397 A. Net daily production associated with these platforms
prior to the hurricane was 11.6 million cubic feet of natural gas equivalent
(MMcfe). The Company anticipates Eugene Island 397A platform will be back
online in 60 days, resulting in incremental net daily production of 5.8 MMcfe.
W&T expects additional production to return online before the end of the
year, as further field repairs are completed and third party processing plants
and pipelines are brought back online. Based on the Company's estimates and
those from third party operators, W&T expects its exit rate to be
approximately 185 to 195 MMcfe/day at year-end, which represents approximately
78% of pre-Katrina and 100% of pre-Rita production. The Company expects to
return to pre-Katrina production levels in second quarter 2006.
W&T does carry insurance for physical damage to producing and drilling
wells, platforms and pipelines. The Company has notified its insurance
provider and is working with adjusters to process claims from both storms.
The insurance program utilizes a self-insured retention of $5 million and
insured losses are expected to exceed this figure.
Tracy Krohn added, "We have been operating successfully in the Gulf of
Mexico for over 20 years and know that managing the impact of hurricanes is
part of the process. Although the third quarter of 2005 offered unprecedented
challenges, our staff performed exceptionally well and achieved remarkable
results. Prior to Katrina we were drilling four wells on properties operated
by W&T. Despite having to evacuate twice, immediately following Rita we
brought back all of those rigs except for one. Although we lost about two
weeks of drilling time, we drilled three exploration and two development wells
during the third quarter, all of which were successful. Our drilling program
remains on track for the balance of the year.
"We have continued to find that the Gulf of Mexico offers an attractive
return on our investment and see significant opportunity ahead. Our debt free
balance sheet, significant cash position and an un-hedged production profile
at a time of record high commodity prices, positions W&T to aggressively
pursue our growth strategy as desirable properties become available."
Outlook: Certain factors affecting these forward-looking statements are
listed in this news release. W&T anticipates operating expenses on a Mcfe
basis to increase due to lower production because of deferred production and
costs incurred to repair damages from the hurricanes. Guidance has been
revised to reflect information gathered by the Company and third party sources
about the progress of storm repairs. Guidance on performance for the fourth
quarter, full year of 2005, and previous full year guidance are shown in the
table below.
Fourth Estimate for Prior Estimate for
Estimated Production Quarter Full-Year 2005 Full-Year 2005
Crude oil (MMBbls) 0.7 - 0.8 4.10 - 4.14 5.2 - 5.5
Natural gas (Bcf) 7.3 - 7.7 44.5 - 44.9 51.7 - 54.4
Total (Bcfe) 11.7 - 12.3 69.1 - 69.7 83.1 - 87.4
Expenses Fourth Estimate for Prior Estimate for
($ in millions, Quarter Full-Year 2005 Full-Year 2005
except as noted)
Lease operating
expenses $21.2 - $23.2 $73.5 - $75.5 $75.0 - $78.0
Gathering,
transportation
& production taxes $1.8 - $2.3 $12.0 - $12.5 $15.0 - $16.0
General and
administrative $8.8 - $10.8 $28.0 - $30.0 $26.0 - $30.0
Depending on how quickly the Company is able to get production back online
in the 1st quarter 2006, it expects to produce approximately 85.0 to 90.0 Bcfe
in full year 2006.
Conference Call Information: W&T will hold a conference call to discuss
financial and operational results on Thursday, November 10, 2005 at 10:00 a.m.
Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 262-2137 a
few minutes before the call begins. The call will also be broadcast live over
the Internet from the Company's website at http://www.wtoffshore.com. A
replay of the conference call will be available approximately two hours after
the end of the call until Thursday, November 17, 2005, and may be accessed by
calling (303) 590-3000 and using the pass code 11042777.
About W&T Offshore
Founded in 1983, W&T Offshore is an independent oil and natural gas
company focused primarily in the Gulf of Mexico, including exploration in the
deepwater, where it has developed significant technical expertise. W&T has
grown through acquisition, exploitation and exploration and now holds working
interests in over 100 fields in federal and state waters and a majority of its
daily production is derived from wells it operates. For more information on
W&T Offshore, please visit its Web site at http://www.wtoffshore.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements reflect our current
views with respect to future events, based on what we believe are reasonable
assumptions. No assurance can be given, however, that these events will
occur. These statements are subject to risks and uncertainties that could
cause actual results to differ materially including, among other things,
market conditions, oil and gas price volatility, uncertainties inherent in oil
and gas production operations and estimating reserves, unexpected future
capital expenditures, competition, the success of our risk management
activities, governmental regulations and other factors discussed in our Annual
Report on 10-K for the year ended December 31, 2004 (http://www.sec.gov).
W&T OFFSHORE, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2005 2004 2005 2004
Revenues:
Oil and natural gas $153,355 $120,381 $431,744 $368,908
Other 70 153 532 952
Total revenues 153,425 120,534 432,276 369,860
Expenses:
Lease operating 18,226 17,147 52,253 52,956
Gathering, transportation
costs and production taxes 2,551 3,907 10,186 10,465
Depreciation, depletion, and
amortization 43,403 33,663 131,967 114,299
Asset retirement obligation
accretion 2,203 2,345 6,829 6,830
General and administrative 6,524 4,552 19,187 13,316
Total operating expenses 72,907 61,614 220,422 197,866
Income from operations 80,518 58,920 211,854 171,994
Net interest income (expense) 581 (378) 468 (1,524)
Income before income taxes 81,099 58,542 212,322 170,470
Income tax expense 27,997 20,489 74,156 59,664
Net income 53,102 38,053 138,166 110,806
Less: Preferred stock dividends - 300 - 600
Net income applicable to common
and common equivalent shares $53,102 $37,753 $138,166 $110,206
Earnings per common share:
Basic $0.80 $0.72 $2.14 $2.10
Diluted $0.80 $0.58 $2.09 $1.68
Weighted average shares outstanding:
Basic 65,970 52,612 64,649 52,601
Diluted 65,970 65,950 65,968 65,939
Consolidated Cash Flow Information
Net cash provided by operating
activities $145,342 $88,001 $343,894 $259,789
Capital expenditures $82,488 $52,596 $229,599 $173,590
Other Financial Information
EBITDA $126,124 $94,928 $350,650 $293,123
We define EBITDA as net income plus income tax expense, net interest
expense, depreciation, depletion, amortization and accretion. Although not
prescribed under GAAP, we believe the presentation of EBITDA is relevant and
useful because it helps our investors understand our operating performance and
makes it easier to compare our results with those of other companies that have
different financing, capital or tax structures. EBITDA should not be
considered in isolation from or as a substitute for net income, as an
indication of operating performance or cash flows from operating activities or
as a measure of liquidity. EBITDA, as we calculate it, may not be comparable
to EBITDA measures reported by other companies. In addition, EBITDA does not
represent funds available for discretionary use.
The following table presents a reconciliation of our consolidated net
income to consolidated EBITDA:
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2005 2004 2005 2004
Net income $53,102 $38,053 $138,166 $110,806
Income tax expense 27,997 20,489 74,156 59,664
Net interest (income) expense (581) 378 (468) 1,524
Depreciation, depletion,
amortization and accretion 45,606 36,008 138,796 121,129
EBITDA $126,124 $94,928 $350,650 $293,123
W&T OFFSHORE, INC.
Operating Data
(Unaudited)
Three Months Nine Months
Ended Ended
Sept. 30 Sept. 30
2005 2004 2005 2004
Net sales:
Natural gas (MMcf) 11,498 12,625 37,150 40,263
Oil (MBbls) 993 1,198 3,379 3,733
Total natural gas and oil (MMcfe) 17,456 19,810 57,421 62,658
Average daily equivalent sales
(MMcfe/d) 189.7 215.3 210.3 228.7
Average realized sales price:
Natural gas ($/Mcf) $8.64 $5.90 $7.31 $5.92
Oil ($/Bbl) 54.39 38.34 47.38 34.99
Natural gas equivalent ($Mcfe) 8.79 6.08 7.52 5.89
Average per Mcfe data ($/Mcfe):
Lease operating expenses $1.04 $0.87 $0.91 $0.85
Gathering, transportation cost and
production taxes 0.15 0.20 0.18 0.17
Depreciation, depletion,
amortization and accretion 2.61 1.82 2.42 1.93
General and administrative 0.37 0.23 0.33 0.21
Net cash provided by operating
activities 8.33 4.44 5.99 4.15
EBITDA 7.23 4.79 6.11 4.68
W&T OFFSHORE, INC.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, December 31,
2005 2004
Assets
Current assets:
Cash & equivalents $140,510 $64,975
Accounts receivable 43,576 71,714
Prepaid expenses and other 9,820 9,293
Total current assets 193,906 145,983
Property and equipment - at cost 1,379,571 1,147,367
Less accumulated depreciation,
depletion and amortization 675,120 543,154
Net property and equipment 704,451 604,213
Other assets 13,221 10,589
Total assets $911,577 $760,784
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $119,626 $107,220
Asset retirement obligations 26,080 27,489
Accrued liabilities and other 30,373 21,738
Total current liabilities 176,080 156,447
Long-term debt - 35,000
Asset retirement obligations, less
current portion 113,985 114,937
Deferred income taxes 124,610 92,093
Other liabilities 2,429 2,429
Shareholders' equity:
Preferred stock - 45,435
Common stock 1 -
Additional paid-in capital 52,303 6,478
Retained earnings 442,171 307,965
Total shareholders' equity 494,475 359,878
Total liabilities and shareholders' equity $911,578 $760,783
W&T OFFSHORE, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2005 2004
Operating activities:
Net income $138,166 $110,806
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion, amortization
and accretion 138,796 121,129
Amortization of debt issuance costs 262 346
Share-based compensation 390 391
Deferred income taxes 32,517 21,690
Changes in operating assets and liabilities 33,763 5,427
Net cash provided by operating activities 343,894 259,789
Investing activities:
Investment in oil and gas property
and equipment (229,241) (173,118)
Proceeds from sales of oil and gas
property and equipment 1,777 119
Purchases of furniture, fixtures
and other (358) (472)
Investment in marketable securities (1,822) -
Change in restricted deposits (187) 39
Net cash used in investing activities (229,831) (173,432)
Financing activities:
Borrowings of long-term debt 2,550 160,300
Repayments of borrowings of long-term debt (37,550) (227,300)
Dividends to shareholders (2,639) (2,968)
Equity offering costs - (1,264)
Debt issuance costs (889) -
Net cash used in financing activities (38,528) (71,231)
Increase in cash and cash equivalents 75,535 15,125
Cash and cash equivalents, beginning of period 64,975 4,016
Cash and cash equivalents, end of period $140,510 $19,141
Contacts:
Manuel Mondragon, Assistant Vice President of Finance
investorrelations@wtoffshore.com
713-297-8024
Ken Dennard / ksdennard@drg-e.com
Lisa Elliott / lelliott@drg-e.com
DRG&E / 713-529-6600
SOURCE W&T Offshore, Inc.
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CONTACT:
Manuel Mondragon, Assistant Vice President of
Finance, investorrelations@wtoffshore.com, +1-713-297-8024; Ken
Dennard, ksdennard@drg-e.com, Lisa Elliott, lelliott@drg-e.com,
both of DRG&E, +1-713-529-6600
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